Give Kerala one-time bailout package, SC urges Centre

The Supreme Court on Monday, 12 March, urged the union government to intervene in Kerala’s financial crisis and provide a one-time package to bail out the state from its current crisis. The union government has to respond by Wednesday, 13 March.

A bench of justices Surya Kant and K.V. Viswanathan said that the package can be subject to strict conditions. “You can be slightly liberal and give a one-time package as a special case. Add more rigid conditions in the future budgets, and before 31 March, give them the special package. But subject to harsher conditions than other states,” said Justice Kant.

The top court was hearing a plea by the state which has argued that the union government was unduly interfering with the state’s power to borrow and regulate its finances.

The court added that it was not an expert in financial matters, but governments should be able to work out a middle path.

Meanwhile, the union government informed the court that it would release Rs 5,000 crore to the state by 1 April.

The court asked the union government to examine what can be done in the next 10 days to help the state of Kerala.

Senior advocate Kapil Sibal, appearing for Kerala, informed the apex court that Kerala needs more financial assistance to overcome the current crisis. During the hearing, Sibal sought an immediate release of Rs 19,000 crore that the union government owes Kerala.

Earlier, the Centre had announced that it would provide assistance of Rs 13,600 crore to Kerala. Out of this, Rs 8,000 crore has already been disbursed. Attorney General R. Venkatramani informed the court that the ministry of energy has to pay an additional Rs 4,500 crore, however.

Meanwhile, the Centre said that it cannot give any "special" treatment to Kerala. “Theirs is not a special case. We have declined other states and they do not have budget expenditures. They have 15 times more bailout than expenditure package," said Venkataramani, who had also appeared for the union government.

The bench asked the state and the union government to work out an interim solution and suggested that a special concession could be given to Kerala for now.

In its petition filed in December, the Kerala government has alleged that the union government’s decision to impose limits on the state's borrowings had led to an accumulation of unpaid dues and would result in a grave financial crisis. Subsequently, the state had failed to pay salaries to many of its employees for the month of February.

The state's plea seeks the lifting of borrowing restrictions, asserting that central interference compromises federal integrity. Kerala, which spearheaded the legal challenge against the Centre's borrowing limits, claims this has led to retaliatory measures, including the threat of withholding necessary funds unless the case is dropped.

Under the Act, Kerala can borrow Rs 11,731 crore within the borrowing limit. The present petition, however, has nothing to do with this loan amount.

The demand in the petition is for immediate permission to take a loan of Rs 24,000 crore. However, this was denied citing the earlier petition.